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Equifax (EFX) Tanks 14% as Massive Data Breach News Surfaces

The brand image and creditability of Equifax Inc. (EFX - Free Report) is in question as very sensitive personal data of approximately 143 million consumers has been stolen from the credit information provider’s database. Reportedly, nearly two-third of the adult U.S. population has been affected due to this cyber attack.

The company late last Thursday announced that a data breach occurred between mid-May and July this year, which was discovered on Jul 29. Per Equifax, criminals stole consumer data like “names, Social Security numbers, birth dates, addresses and, in some instances, driver’s license numbers.”

In addition to this, as per Equifax’s investigation, hackers accessed the credit card numbers of about 209,000 U.S. consumers and “certain dispute documents with personal identifying information” of nearly 182,000 U.S. consumers.

Shares of Equifax plunged nearly 14% last Friday after news of the cyber attack surfaced. Notably, the stock has significantly underperformed the industry to which it belongs to in the year-to-date period. Equifax has lost 4.2% of its value during this period, while the industry recorded growth of 26.2%.

Nonetheless, the financial information services provider further noted that its core consumer or commercial credit reporting databases seemed to be safe as it did not find any unauthorized activity. This implies that the consumers’ credit scores are safe.

Among the Worst Data Breaches

This is not the first instance when consumer data has been stolen from a company’s data base. Last December, Yahoo! Inc. reported a massive data breach, where private information of over one billion users was compromised. Other big companies like Target Corporation (TGT - Free Report) , Anthem Inc. (ANTM - Free Report) and Sony Corporation (SNE - Free Report) have also been victims of cyber attack, when fraudsters stole large number of consumer data.

However, sensitivity of the information exposed in Equifax’s data breach case makes it one of the worst in recent times as well as bigger than those at the aforementioned companies. The latest data breach at Equifax is expected to have a lasting impact as criminals can use the stolen resources for opening new accounts, applying for credit cards or loans, buying insurance, renting an apartment or even make tax frauds.

It should be noted that banks and financial institutions rely on the United States’ three main consumer credit reporting agencies — Equifax, TransUnion (TRU - Free Report) and Experian. Therefore, with access to social security, driver’s license and credit card numbers, criminals can make such frauds due to which consumers will have to suffer for a long time.

Criticism Mounting

The recent cyber attack has heavily tarnished the brand image, reputation and credibility of Equifax. The company is facing huge customer criticism, while cybersecurity companies are questioning its preparedness and response to this massive data breach.

Various investigation agencies, including attorney generals of New York and Illinois, and the U.S. House Financial Services Committee, have already started probing whether the company met its risk management responsibilities or not. Equifax’s directors may be charged for negligence if the investigating agencies discover any loopholes in risk management.

Also, per Reuters, two lawsuits have been filed against the company’s negligence over consumer data protection, one at Portland, OR, and one in Atlanta.

Bottom Line

With the company facing huge criticism from customers, and lawmakers and investigating agencies probing the mishap, troubles for Equifax are unlikely to end any time soon. We opine that the entire issue may result in loss of customers and the company may also have to make huge compensation to its clients. This is feared to have an adverse impact on the company’s financial performance in the near term.

The recent cyber attack proved that most organizations across the globe still lack proper cybersecurity measures. With cyber security becoming a matter of utmost importance, companies should regard it as part of safeguarding strategies and look for more stringent cybersecurity measures to plug the loopholes in the system.

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

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